March 11, 2014

The long view

A while back, I picked up a copy of Wait: the Art and Science of Delay by Frank Partnoy. The title attracted me since I've been known to procrastinate once or twice in my life. In fact, I may be doing it now. Anyhow, towards the end, he makes some interesting observations on how we measure economic success.

Typically, the focus is on GDP or gross domestic product. There are lots of problems with that. For one thing, GDP might go way up in the wake of a disaster or war as people spend more to deal with it, even if they become more miserable along the way or if it grows at the expense of long term prosperity.

Focusing on things like GDP is especially problematic if the focus is on the short term. Plenty of companies have gone belly up because their CEOs focused on immediate gains rather than long term stability, let alone sustainability.

He comes up with a good analogy:

Focusing narrowly on GDP is like driving a car and only looking at how fast you are going. Sustainability means you should also ask how much gas is left in the tank or whether you need to adjust your position on a winding road.